The Sources of Prosperity – a Fair Legal System

ryanEconomics(ML), Mini Lessons

Common Sense Economics: What Everyone Needs to Know about Wealth and Prosperity

The foundation for economic progress is a legal system that protects privately owned property and enforces contracts in an evenhanded manner.

The legal system provides the foundation for the protection of property rights and enforcement of contracts. … trade moves goods toward people who value them more and makes larger outputs possible as the result of gains from specialization and large-scale production methods. To reduce uncertainties accompanying trade, a legal system must provide evenhanded enforcement of agreements and contracts. This increases the volume of exchange and the gains from trade, and thereby promotes economic progress.

Well-defined and enforced property rights are crucial for the realization of gains from trade. Property is a broad term that includes ownership of labor services, as well as physical assets such as buildings and land. Private ownership of property involves three things: (1) the right to exclusive use; (2) legal protection against invaders – those who would see to use or abuse the property without the owner’s permission; and (3) the right to transfer (sell or give) to others.

  1. How does having title to his land help to realize “Eusebio’s Dream”?

The video clip is set in Peru, but the problem of property rights exists everywhere.

In the United States, the 5th Amendment allows compensation for the seizing of property for public use (eminent domain). But eminent domain is often abused. Watch the trailer for the movie “Little Pink House”, due to be released in spring.

Questions continued
  1. Should the government be able to seize private property to help out corporations?

This reading is an excerpt from Certell’s Common Sense Economics eBook.  Certell offers curriculum materials and eBooks free of charge for students and teachers.  Click here to download the Common Sense Economics

Image Citation:

Little Pink House.  Digital Image. Athena Film Festival.  February 3, 2017.